Optimal Trading Strategies

<body stylesrc="../_private/template_title.htm" topmargin="10" leftmargin="10" bgcolor="#FFFFFF" link="#333366" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table2"> <tr> <td width="780"> <div align="center"> <table border="0" cellpadding="5" cellspacing="0" height="206" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table3"> <tr> <td align="right" height="198" width="1%"> <p align="left"> <img border="0" src="../images/book_kissell_and_glantz_(2003).gif" width="138" height="200"></td> <td valign="top" align="left" height="198"> <table border="0" cellspacing="1" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0" id="table4"> <tr> <td colspan="3" width="0%"> <p class="book_title">Optimal Trading Strategies</td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"><img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> <td width="52%" class="book_details_tags" valign="top" height="144" align="left" rowspan="9"> <map name="FPMap2"> <area href="../main/ratings.htm" shape="rect" coords="73, 1, 164, 33"> </map> <img border="0" src="../images_title/kissel33.gif" usemap="#FPMap2" width="206" height="175"></td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" height="32" align="center" width="50%" rowspan="2"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> </table> </td> </tr> </table> </div> <div align="center"> <center> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="468" id="table5"> <tr> <td> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </center> </div> <table border="0" cellpadding="5" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table6"> <tr> <td width="52%" valign="top"> <p align="left" class="body_expanded"><strong style="font-weight: 400">Suppose you are a trader for a mutual fund. You need to unload 100,000 shares of a thinly traded stock—fast. How do you do it? If you are two aggressive, you will move the market against you. If you are too passive, it may take days to fill the order. This is the traders' dilemma.</strong></p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="125" align="right" id="table7"> <tr> <td width="5"> </td> <td width="120"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> <p align="left" class="body_expanded"><strong style="font-weight: 400">Trading for institutional investors is not about making profits. It is about rapid execution with minimal transaction costs. Brokerage fees, bid-ask spreads, impact costs and a myriad other transaction costs can easily consume 2% of a transaction's value. Many institutional investors turn their portfolios over two or three times a year. Poor execution can shave percentage points from annual returns.</strong></p> <p align="left" class="body_expanded"><strong style="font-weight: 400">This outstanding book is about transaction costs—the forms they take, how to anticipate them, how to measure them, and how to mitigate them. The goal is good execution—how to plan for it, how to implement it, and how to assess in retrospect whether you achieved it.</strong></p> </td> <td width="48%" valign="top" class="body" rowspan="2"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table8"> <tr> <td width="100%" bgcolor="#333366"> <p class="header_yellow" align="center">Contents</td> </tr> <tr> <td width="100%" class="explanatory_text"> <table border="1" cellpadding="0" cellspacing="5" style="border-collapse: collapse" bordercolor="#CCCCFF" bgcolor="#CCCCFF" width="100%" id="table9"> <tr> <td class="contents_expanded"> <p class="contents_compressed" style="margin-top: 14; margin-bottom: 8">1. Transaction Costs</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 8">2. Unbundled Transaction Cost Components</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 8">3. Pre-Trade Analysis</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 8">4. Price Appreciation</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 8">5. Market Impact</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 8">6. Timing Risk</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 8">7. Opportunity Cost</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 8">8. The Holy Grail of Market Impact</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 8">9. Optimal Trading Strategies</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 8">10. Principal Bid Transactions</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 8">11. VWAP Trading Strategies</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 8">12. Advanced Trading Techniques</p> <p class="contents_compressed" style="margin-top: 8; margin-bottom: 20">13. Post-Trade Analysis</td> </tr> </table> </td> </tr> </table> <p align="left" class="body"><strong style="font-weight: 400">While the book addresses a practical topic, it does so from a largely theoretical perspective. Its focus is not on the practicalities of trading, intermediaries or vehicles for placing orders. For coverage of such hands-on topics, see Harris (<a href="../titles/harris_larry_(2003).htm">2003</a>) or Schwartz and Francioni (<a href="../titles/schwartz_and_francioni_(2004).htm">2004</a>). Rather, the book delves deeply into the mathematical modeling of transaction costs. This can be used to implement trade support analytics or it can simply be understood by a trader—shaping her understanding of the tradeoffs she faces each time she places a large transaction.</strong></p> <p align="left" class="body"><strong style="font-weight: 400">This is the definitive book on transaction costs. It is required reading for anyone who trades for institutional investors. I also recommend it to any trader—all face transaction costs, so all will benefit from the insights this book offers. I also recommend the book for market risk managers at trading organizations, financial engineers and developers of trading analytics. </strong> </p> <p align="center" class="body"> </p> </td> </tr> <tr> <td width="52%" valign="bottom"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table10"> <tr> <td width="100%"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </td> </tr> </table> <div align="left"> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" bgcolor="#FFFFCC" id="table11"> <tr> <td width="100%" align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" bgcolor="#FFFFCC" id="table12"> <tr> <td> <p class="body" style="margin-bottom: 4; margin-left:5; margin-top:4"><b><font color="#333366" size="3">For related books, see sections:</font></b></p> <p class="bullet" style="margin-left: 5; margin-top: 4; margin-bottom: 4"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/other_functions_trading.htm">Other Functions - Trading</a></p> <p class="bullet" style="margin-left: 5; margin-top: 4; margin-bottom: 4"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/other_functions_trading.htm">Markets - Equity</a><p class="bullet" style="margin-left: 5; margin-top: 4; margin-bottom: 4"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/portfolio_management_general.htm">Portfolio Management - General</a><p class="bullet" style="margin-left: 5; margin-top: 4; margin-bottom: 4"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/risk_management_liquidity_risk.htm">Risk Management - Liquidity Risk</a><p class="bullet" style="margin-left: 5; margin-top: 4; margin-bottom: 4"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/risk_management_market_risk.htm">Risk Management - Market Risk</a></td> </tr> </table> </td> </tr> </table> </div> </td> <td>  </td> </tr> </table> </div>  <table border="0" style="border-collapse: collapse" width="100%" cellpadding="0" id="table1" bgcolor="#FFFFFF"> <tr> <td colspan="2" height="12"> <p style="margin-top: 0"> </td> </tr> <tr> <td align="right"> <p align="left" style="margin-bottom: 2px"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Ads by Contingency Analysis.</font></a></td> <td align="left"> <p align="right" style="margin-bottom: 2px"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Advertise on this site.</font></a></td> </tr> <tr> <td align="center" colspan="2">  <iframe src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=iframe" allowtransparency="true" background-color="transparent" style="margin: 0px; padding: 0px; border-width: 0px" width="300" height="250" frameborder="0" marginwidth="0" marginheight="0" scrolling="no"> <![if lt IE 4]> <script src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=js" type="text/javascript"> </script> <noscript> <a href="http://servedbyadbutler.com/go2/;ID=147917;size=300x250;setID=93136"> <img src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=img" border="0" height="250" width="300" alt=""></a> </noscript><![endif]> </iframe>   </td> </tr> </table> <p align="center" style="margin-top: 20"> <map name="FPMap0_I1"> <area href="http://www.riskbook.com" shape="rect" coords="0, 0, 184, 29" target="_top"></map> <img border="0" src="../images/open_book_riskbook.gif" usemap="#FPMap0_I1" width="185" height="30"></p> <p class="a" align="center"><font face="Arial" size="2"><a href="../main/disclaimer.htm">disclaimer</a></font></p> <p class="a" align="center"><span class="verdana10">website:</span> <a target="_top" href="http://www.contingencyanalysis.com"> <font size="2" face="Arial">http://www.contingencyanalysis.com</font></a><br> <span class="verdana10">books direct link:</span> <a target="_top" href="http://www.riskbook.com"><font size="2" face="Arial">http://www.riskbook.com</font></a><br> copyright <font face="Times New Roman">©</font> Contingency Analysis, 1996 - current</p> <p class="a" align="center"><map name="FPMap1_I1"> <area target="_top" href="http://www.contingencyanalysis.com" shape="rect" coords="0, 0, 240, 88"> </map><img border="0" src="../images/logo_book_white.gif" usemap="#FPMap1_I1" width="241" height="89"></p>  </body>